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For nearly 30 years, when markets have fallen sharply, Value Research's advice has been consistent. Stay invested. It will recover. And for 30 years, that advice has held, not because we had some great foresight, but because markets work a certain way. They exaggerate one-off events, overreact, and correct themselves as fundamentals prevail.
The record backs this up. The Covid crash of 2020: the Sensex fell 38 per cent in 10 weeks. Eight months later, every rupee was recovered. Demonetisation: 11 per cent down, four months to a new high. The taper tantrum of 2013: 12 per cent down, 29 days.
If this is the market history you know, you have learned a specific lesson. Sit still. The V-shape will come.
That is precisely why what is happening now deserves a different kind of attention.
In every V-shaped recovery of the last decade, what was damaged was sentiment. Real events, yes (lockdowns, demonetisation, global taper), but none of them damaged the earnings power of Indian companies for long. Sentiment recovered, earnings held, and the V drew itself. The fundamentals were intact. That is why our advice worked.
This time, something different is breaking. The war is taking out physical refining capacity. Estimates vary, but a significant chunk of global capacity may already be offline. And nobody knows when, or whether, it comes back. You cannot fix that with a rate cut or a policy statement. Petrol, diesel, fertiliser, plastics and everything downstream of a barrel of crude stay expensive until the infrastructure is rebuilt. Rebuilding is measured in years, not quarters.
India sits squarely in the path of this. We import over 85 per cent of our crude. When the global oil price rises, it moves into the price of petrol, the cost of cement, the monthly grocery run. And it moves into corporate earnings. The companies in your mutual fund portfolio (the ones that make cars, build houses, sell soaps) are paying more for raw materials today than six months ago. That cost does not show up as a single-day fall on your screen. It shows up over several quarters, as margins thin and earnings growth slows.
As this war unfolds, the questions we get from investors are remarkably consistent. Should I pause my SIPs? Should I shift from equity to debt? What return number do I put in my retirement calculator now? If I am drawing income from this portfolio, does the plan still hold?
Good questions. The kind that deserves more than a paragraph.
On Saturday, May 30th, at 12 noon, Dhirendra Kumar and I are taking these on in Advisor Live. The session: "What to change. What to keep." Five things that stay. Three that genuinely change. One diagnostic question that tells you which side you sit on.
We will also take your questions live.
The session is for Value Research Fund Advisor subscribers. If you are one, you already have access. If you are not, and these questions sound like yours, this is a good time to join.
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